January Month End Trading Report

We trust that this email finds you well as we wind up the first month of trading in the new year. We hope that everyone was as eager as we were to get back down to business and start the 2010 year off with a bang. Thank you to all our investors who have participated with us in the Cayo Flow FX systems for the month of January. Overall we were quite pleased with the average performance for the month across all systems, and we have updated our performance for each system on its corresponding information page on the website. However, as many of you can attest it was an interesting month to say the least from one system to another, with a disappointment on the final outcome of our McLaren FX system, but excellent results on our two Scalping systems. Here are the results of January’s trading activity…

January 2009 Performance

Precision FX: +33.91%

Chrome FX: +27.92%

McLaren FX: -19.70%

Our Performance Table has also been updated as follows…

MONTH	PRECISION	CHROME	MCLAREN	AVERAGE
Dec-08	32.30%	72.73%		52.52%
Jan-09	18.70%	-4.48%		7.11%
Feb-09	27.50%	160.13%		93.82%
Mar-09	29.50%	21.17%		25.34%
Apr-09	-34.40%	49.91%		7.76%
May-09	53.30%	18.65%	9.43%	27.13%
Jun-09	23.60%	16.01%	30.46%	23.36%
Jul-09	10.10%	3.76%	28.02%	13.96%
Aug-09	26.92%	6.82%	26.94%	20.23%
Sep-09	-0.32%	32.73%	7.83%	13.41%
Oct-09	-4.26%	20.36%	17.24%	11.11%
Nov-09	10.76%	-20.91%	11.74%	0.53%
Dec-09	9.37%	15.94%	0.33%	8.55%
Jan-10	33.91%	28.06%	-19.70%	14.09%
TOTAL RETURN:	594.89%	2305.77%	164.03%	1021.56%
MONTHLY AVERAGE	16.93%	30.06%	12.48%	22.78%

While our two scalping systems performed exceptionally well in January, we couldn’t say the same for McLaren. The system really struggled, especially during the 3rd week of the month.  We were caught mid-trade with a few unexpected high impact news announcements (in particular the Obama Bank announcement) combined with on overall poor market sentiment for the McLaren strategy to profit in. This in-turn caused a bit of a roller coaster ride with the live system. In other words we have witnessed results that we have not seen over the past couple of years on the McLaren system, and we are not yet quite sure just how to interpret these results. Our 3% risk factor magnifies the ups & downs, but the fact remains, we have never seen so many continuous losses yet. We will be watching the system closely in February to ensure it slides back into track, and hasn’t gone stale on us.

The developers have been working on a version 2 of the system, which due to last months performance, may be implemented as soon as March 1st.  The version 2 system is almost identical to our live system. The only difference is the trend determination and the portion of the trend that McLaren v2 trades. Our live system trades with mature longer term weekly and daily trends but the v2 system trades with less mature daily & 4 hour trends. These trends are also calculated a bit differently for McLaren v2.

For clients diversifying their funds across all 3 systems you should have easily coasted through the McLaren draw down, and had a nice overall average monthly gain of +14.04% from the 3 systems combined.  A disciplined approach restricts the risk and reduces the exposure to volatility in the marketplace.   The true key to continuously make money in the foreign exchange markets is quite simple… 1. Stay diversified. 2. Use short term strategies for long term growth. Keeping your funds in the account especially after losses, allows them time to recover and compound. Losses will inevitably happen from time to time. Staying diversified and allowing your funds time to recover is the key to riding out the storms and coming out on top.

NEW DEVELOPMENTS

New Sub-Strategy - Many of you have inquired about the new pair being traded on the Chrome FX system. There has been a hybrid grid trading system implemented as a sub-strategy to the core tactics employed by Chrome FX. The sub-strategy trades on the EURCAD pair only and opens up to 6 trades at a time. The strategy is coming out of a 5 month testing phase, and implemented into the live system on a low-moderate risk basis to start. We will continue to monitor the live performance on the managed accounts with a watchful eye for the next upcoming months.

Segregated Accounts – For clients with $1M USD or more, our current broker has a solution for segregated accounts, if requested by an investor. This is a unique setup tailored specifically to our investors requesting this service. This would allow the client to keep their funds in his or her own personal bank account in their own name (quite possibly at their current bank depending on the bank. If not, they would have to move them to their own account in a reputable bank).  An API script and or FIX connection would allow the funds to be accessed and traded in the interbank forex market without having to move to the broker. Everything would be the same, only all win and loss settlements would be made on a daily or weekly basis dependant on the bank. Please note that this is not available to general clients of the brokerage. It is a special arrangement we have in place, and can be implemented for high net work clients (1 Million USD or higher) who may have difficulty moving their funds for whatever reason or who are not comfortable in doing so. Interested parties are urged to contact us for details.

Account Discrepancies - Many of you have inquired with us wondering why your monthly returns are either more or less than ours posted on our website. Our numbers are from the 1st of each calendar month, to the last trading day of the calendar month. If you have invested in the middle of the month, your numbers may not match ours. Our returns are gross of performance fees which are deducted at the end of each month.

Please visit our website (www.cayoflow.com) and blog for frequent updates and newsletters, and do not hesitate to contact us at any time should you have any inquires, concerns, or partnership arrangements you would like to converse about.

Thank you to all our current investors for trading with us, and we would like to wish you all the best in February.

Warm Regards,

The Cayo Flow team